Chapter 5 Flashcards
internal environment factors
-people
-resources
-business
-business models
-corporate culture
the three business resources
-natural resources
-labor resources
-capital resources
the five business locations
-shopping centers
-retail shopping strips
-home-based
-online
-industrial estates
factors that affect the location decision
-visibility
-foot-trafficking
-proximity to customers, suppliers and competitors
-space requirements
-cost/budget requirments
5 factors affecting the finance decision
-business structure
-overall cost
-flexibility
-level of control
-terms of finance
what are the two sources of business funds/finance
internal source of funds
external source of funds
equity
a owner uses his own money to fund the business (internal)
benefits and limitations of equity
benefits:
no risk of debt
no terms set by banks on how to repay money
limitations:
may not work and can lose money
benefits and limitations of debt
benefits:
expand your business
banks advise you
limitations:
not flexible
high cost
interest
short term and long term borrowing examples
short term:
bank overdraft
bank bills
trade credit
long term:
mortgage
leasing
benefits and limitations of short term debt
benefits:
money instantly
minimal interest
no long documentation process’
limitations:
wont get a lot of money
banks might not give you money
can charge high interest
benefits and limitations of long term debt
benefits:
can take more money
less interest
limitations:
long term commitment
pros of buying an existing business
- created a place in the market
- has name and reputation attached to it
-own any employees and equipment in he business
-inherit existing cash flow and systems to sustain it
cons of buying an existing business
-buying business for 3 times its cash flow
-business built on reputation of previous owner
-business system may have major weakness
-employees may have bad habits
starting a new business pros
- do whatever you want
-can start small
-can run business part time
-can establish any business process
starting a business cons
-no existing business process
-requires lots of energy
-knowing what to do to reach goals may be difficult
-many start-ups do not see a profit for the first few years
-owner typically does everything
what must a buyer do prior to buying an existing business
perform due diligence- a thorough appraisal of a business to establish its assets and liabilities and evaluate its commercial potential.
factors affecting the start-up decision
-type of good or service
-availability of start-up capital
-level of competition in market
-gap in the market
-viable purchase options
unlimited liability
full liability of owner (if their business fails) to the extent that their personal assets could be
seized to pay debts
